Sears, CSC End Outsourcing Suit

Sears fired CSC one year into a 10-year contract. After that, the facts start to diverge.

Sears Holdings and the Computer Sciences Corp. ended a multi-year IT-outsourcing contract dispute on Oct. 22, with few details released, except perhaps the most meaningful one: Sears is paying CSC.
"Sears and CSC have amicably settled their differences on mutually satisfactory terms, with Sears paying an undisclosed amount to CSC," said the brief statement, issued just before 10 p.m. EST.
Back in May of 2004, Sears hired CSC for a $1.6 billion 10-year IT outsourcing package. Some 11 months later, shortly after the Sears and Kmart merger, Sears wanted out of the deal.

Thats where the facts start to diverge. The CSC version has Sears pushing to end the contract just shy of its one-year agreement, as a "convenience" to avoid a $96 million killfee. By canceling it before the one-year mark, its early termination penalty would have only been $58 million.

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Sears version has CSC having performed quite poorly and that it was terminated for cause.
The brief statement offers few clues for which side blinked. The statement said "CSC does not expect to experience a charge associated with the impairment of assets related to the Sears/CSC agreement," which means relatively little. The joint statement was issued by CSC with contact information for both sides.

Sears Holdings also said that it didnt expect the results to be material on its side, either. "Because Holdings established a reserve for the expected settlement by Sears, Holdings does not expect that the settlement will have a material effect on its 2007 (or full year) earnings. Holdings also does not expect the settlement to have a material effect on its financial position."

Evan Schuman is the editor of CIOInsight.com's Retail industry center. He has covered retail technology issues since 1988 for Ziff-Davis, CMP Media, IDG, Penton, Lebhar-Friedman, VNU, BusinessWeek, Business 2.0 and United Press International, among others. He can be reached by e-mail at Evan.Schuman@ziffdavisenterprise.com.